How to Create – and Pay For – a Five-Year Plan

The Challenge

The building, in the Bronx at 2385 Barker Avenue, had payment problems with vendors and no reserves. They were paying bills based on who was yelling louder, from the city agencies to the vendors. The challenge that they had was a lack of leadership. When you have vocal vendors, vocal owners, and vocal board members, you’ve got a lot of people involved in decision-making. You have to maneuver among all of that to make sure that you can take them back to safe shores.

The Solution

The first few months after I came on were very challenging for them. We organized the budget and the expenses. We increased the common charges by 3 percent and the parking fees by about 10 percent. They have to pay back vendors who haven’t been paid for many, many years. We paid the minimum on regular bills that come in every month (oil, water, taxes, and so on) and then we dedicated the rest of the money to the vendors. As we finished paying off one vendor, we’d turn to another. We worked with the vendors to create a payment installment plan. Then we made a forecast of future projects – Local Law 11, boiler repair, roof, whatever major projects are needed. Then we did the allocations for those projects in the next five years. Once you put the building in a five-year cycle, the building is set forever. You have a plan and if you do it on a cycle, the money gets saved into the reserve and it’s available for you to use.

The Lesson

Eliminate surprises. Once you plan, you’re really safe.